Monday, July 30, 2007

On July 19, American Home's stock slumped amid speculation that the company's credit lines were being pulled.

However, analysts dismissed the notion, saying the company told them that its credit lines were intact. . . . .

The following day, Mary Feder, vice president and investor relations director at American Home, told MarketWatch that none of the company's credit lines were being pulled.

But reassuring analysts and investors less than two weeks before warning about margin calls has undermined the credibility of American Home's management team, according to RBC's Ackor.

"Recent conversations with management reaffirmed to us that many of the factors negatively influencing the company's fundamentals were being effectively addressed, and that recent market rumors of liquidity concerns were completely unfounded," the analyst wrote.

"We certainly acknowledge that the recent and severe erosion in the global debt markets was rapid and unforeseen," Ackor added. "We are concerned, however, that management appears to have either been caught entirely off guard (implying they may not fully understand the implications of a difficult operating environment), has not accurately conveyed the potential impact of these operating challenges to the investment community, or both."

American Home announced its financing problems and the decision to halt dividends after 10 pm on Friday, a move that won't help, Ackor said. He added: "The company's dividend-delay confessional at 10:20 p.m. on a Friday night makes us think that both of these points may have merit."